Pending Lawsuit May Affect Amount of Attorney's Fees Collectable from Borrower in Connection with Reinstatement

We wanted to bring a recent opinion issued out of the Eastern District of Michigan in Case No. 09-12543 to your attention, in which a number of borrowers are challenging the amount of attorney's fees that can be recovered in connection with a reinstatement. Based on the provisions in the mortgage contract itself, the current practice in Michigan is to include all reasonable attorney's fees in a reinstatement quote, however this recent opinion may limit the amount of the attorney's fee recoverable from the borrower. Due to the above referenced opinion, we wanted to update our recommendation that any recoverable attorney fee quoted to a borrower in connection with a reinstatement or proof of claim should be limited to $37.50 until further clarification from the court is obtained in the pending action. The language in the opinion is dicta, and provides the borrowers the opportunity to pursue their arguments that based upon MCL 600.2431 as opposed to the mortgage contract, should decide allowable attorney's fees in the case of a reinstatement. While the Court's Opinion is based on a Rule 12(b)(6) motion, and not a ruling of law, we believe it would be wise for servicers to, at least for the time being, limit recoverable attorney fees to $37.50 as included in a reinstatement quote or proof of claim.

Financing the American Dream

http://www.fdic.gov/news/news/speeches/chairman/spoct2510.html

Please open the link provided herein-below to view the remarks contained in the keynote address by FDIC Chairman Sheila C. Bair to the Mortgages and the Future of Housing Finance Symposium sponsored by the Federal Deposit Insurance Corporation and the Federal Reserve System in Arlington, VA delivered on October 25, 2010.

Lender Sentenced to 10 Years for Foreclosure Rescue Scam

Peter James Porcelli, II, 57, Pinellas County, Florida, was sentenced by U.S. District Judge Susan Bucklew to 10 years in federal prison for mail fraud. As part of Porcelli's sentence, the Court entered a money judgment for $1.8 proceeds from the Porcelli had pleaded guilty on April 15, 2010.

According fraud. million, an amount equal to to court documents, Porcelli was a Florida-licensed mortgage lender with his company, Silverstone Lending. Through court lists, Porcelli found people whose homes were falling into foreclosure. Posing as "Peter James," a "Relief Coordinator" for the "nonprofit" Safe Harbour Foundation, Porcelli mailed the homeowners flyers about Safe Harbour. The flyers made it appear that Safe Harbour was there to save the homeowners in their hour of need. When homeowners responded to the flyers, however, "Peter James" referred them to Peter Porcelli at Silverstone Lending, who lent them high-fee, high interest, short-term balloon payment loans. The fees for Porcelli's loans averaged approximately 60% of the total amount of each loan, and the interest on the loans was as high as 260.18% APR. The loans generally came due in six months.

Many victims lost their homes when they could not repay Porcelli's loans, including one victim who became homeless as a result of the offense.

U.S. Attorney Robert E. O'Neill announced the sentence.

This case was investigated by the United States Postal Inspection Service. It was prosecuted by Assistant United States Attorney Thomas N. Palermo.

This case was charged as part of the Middle District of Florida's Mortgage Fraud Surge, a joint effort by the U.S. Attorney's Office for the Middle District of Florida, the FBI, and numerous other federal, state, and local law enforcement agencies. The Surge, which culminated on November 2, 2009, focused intensive investigative and prosecutorial resources on the mortgage fraud crisis that plagues middle Florida and has contributed to the current economic situation nationwide. The Surge accelerated mortgage fraud cases to bring perpetrators to justice quickly and provide maximum deterrence. It was the first step in the This case was charged as part of the Middle District of Florida's Mortgage Fraud Surge, a joint effort by the U.S. Attorney's Office for the Middle District of Florida, the FBI, and numerous other federal, state, and local law enforcement agencies. The Surge, which culminated on November 2, 2009, focused intensive investigative and prosecutorial resources on the mortgage fraud crisis that plagues middle Florida and has contributed to the current economic situation nationwide. The Surge accelerated mortgage fraud cases to bring perpetrators to justice quickly and provide maximum deterrence. It was the first step in the Middle District of Florida's Mortgage Fraud Initiative, an ongoing effort to prosecute mortgage fraud of all types throughout the district.

Can Bankruptcy Affect Your Mental Health?

Bankruptcy seems to be fairly common in this economy, so at least there is comfort in numbers. Although most people think of businesses filing for bankruptcy, consumers or individuals can file for different types of bankruptcy as well.


According to the American Bankruptcy Institute, “U.S. consumer bankruptcy filings totaled 1,165,172 nationwide during the first nine months of 2010 (Jan. 1 to Sept. 30), an 11 percent increase over the 1,046,449 total consumer filings during the same period a year ago.”

Bradley Klontz, a clinical psychologist in Hawaii, is a co-author of "The Financial Wisdom of Ebenezer Scrooge: 5 Principles to Transform Your Relationship with Money,” and said that bankruptcy can affect mental health.


“Bankruptcy is an enormous financial and psychological stressor,” Klontz said in an e-mail. “Financial stress can lead to a loss of personal control, depression, anxiety, shame and relationship problems.”

Many people put too much emphasis on money, so that’s why suffering can result from bankruptcy.
“Many of us confuse our self-worth with our net-worth,” Klontz said. “As such, financial problems can deal devastating blows to our self-esteem. Bankruptcy can lead to feelings of guilt and shame, and cause us to isolate from our family and friends out of embarrassment.”

I disagree, Bankruptcy can also improve your mental health by freeing you of the pressures of the debts you are relieved from, stoping the harrassing phone calls, and sleepless nights.

DEBT-RELIEF COMPANIES PROHIBITED FROM COLLECTING ADVANCE FEES UNDER NEW FTC RULE

http://www.ftc.gov/opa/2010/10/debtrelief.shtm


Consumers trying to settle their debts will be protected by a new rule taking effect Oct. 27 that prohibits companies that sell debt-relief services over the telephone from charging fees before settling or reducing a customer’s credit card or other unsecured debt, according to the Federal Trade Commission. The ban on advance fees reflects changes that the Federal Trade Commission made to its Telemarketing Sales Rule last July. Over the past decade, the FTC and state enforcers have brought over 250 law enforcement actions to stop deceptive and abusive practices by debt-relief providers that have targeted consumers in financial distress. The FTC will be enforcing the new rule, as will the states – which also have authority to bring actions under the Rule. The new advance-fee ban specifies that fees for debt-relief services may not be collected until:

* The debt-relief service successfully settles or changes the terms of at least one of the consumer’s debts;

* There is a settlement agreement, debt-management plan, or other agreement between the consumer and the creditor that the consumer has agreed to; and

* The consumer has made at least one payment to the creditor as a result of the agreement negotiated by the debt-relief provider.

BANKS FACE TWO-FRONT WAR ON BAD MORTGAGES, FORECLOSURES

Shoddy mortgage lending has led bankers into a two-front war, pitting them against U.S. homeowners challenging the right to foreclose and mortgage-bond investors demanding refunds that could approach $200 billion, Bloomberg News reported today. While federal regulators and state attorneys general have focused on flawed foreclosures, a bigger threat may be the cost to buy back faulty loans that banks bundled into securities. JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co. and Citigroup Inc. have set aside just $10 billion in reserves to cover future buybacks. Bank of America alone said this week that pending claims jumped 71 percent from a year ago to $12.9 billion of loans. Investors such as Bill Gross’s Pacific Investment Management Co. contend that sellers are obligated to repurchase some mortgages because of misrepresentations such as overstatements of borrowers’ income or inflated appraisals. Their case may be bolstered by probes in 50 states into whether banks used documents that were also flawed to conduct foreclosures. Neither dispute is likely to be resolved quickly. The biggest risks for banks may be loans packaged into mortgage-backed securities during the housing bubble, of which $1.3 trillion worth remain. The aggrieved bondholders include government-controlled firms Fannie Mae and Freddie Mac, bond insurers and private investors.

http://www.bloomberg.com/news/2010-10-21/banks-face-two-front-war-on-bad-u-s-mortgages-flawed-foreclosure-process.html

Favorite Blogs of the Week

So to those of you in the legal profession: Your suspicions are correct. You are smarter and nicer than your MBA siblings. Pity, though, you will always make less.


http://thecareerist.typepad.com/thecareerist/2010/10/mbas-more-uncouth-than-jds.html
 
 
France has many of the goodies (parental leave for up to three years, readily available free daycare, etc.) that are supposed to fix our gender issues. It seems French women's lives are just as pressured as ours--except that they get paid even less--and have to do everything in high heels. “French women are exhausted,” said Valérie Toranian, editor in chief of France's Elle, to the NYT. “We have the right to do what men do--as long as we also take care of the children, cook a delicious dinner, and look immaculate. We have to be superwoman.”


http://thecareerist.typepad.com/thecareerist/2010/10/french-lessons.html




http://thecareerist.typepad.com/thecareerist/2010/10/men-v-women-.html
 

Wants Fries with that PI Suit?

Law Firm Serves Up Legal Help at a Drive-Through


Legal service at one Connecticut law firm can now be as easy to get as a hamburger and fries. The Kocian Law Group has opened a drive-through office in a building that once housed a Kenny Rogers Roasters. A paralegal works at the window, handing out documents and answering questions.

http://www.law.com/jsp/article.jsp?id=1202473738414&src=EMC-Email&et=editorial&bu=Law.com&pt=LAWCOM%20Newswire&cn=nw20101022&kw=Law%20Firm%20Serves%20Up%20Legal%20Help%20at%20a%20Drive-Through
 

http://www.kocianlaw.com/practices/
 
OMG!

What the Hell

What's in a 'Name Partner'? Not a Law Partnership, Appeals Court Says



For 17 years, Raymond Nadel considered himself a partner at New Jersey's Starkman & Nadel. His name was on the marquee and he worked under an agreement that gave him 25 percent of the firm's net profits. But in 2004, firm founder Morris Starkman canned him, citing performance concerns. Nadel sued for what he claimed he was due and was awarded $2.9 million. Now an appeals court says Nadel was a partner in name only and not vested with sufficient indicia of partnership to warrant a payout, regardless of the parties' intent.

http://www.law.com/jsp/article.jsp?id=1202473728313&src=EMC-Email&et=editorial&bu=Law.com&pt=LAWCOM%20Newswire&cn=nw20101022&kw=What%27s%20in%20a%20%27Name%20Partner%27%3F%20Not%20a%20Law%20Partnership%2C%20Appeals%20Court%20Says

US Supreme Court Case to Watch

Title: Archstone Multifamily Series I Trust v. Niles Bolton Associates, Inc.


Docket: 10-103

Issue(s): Whether a federal statutory scheme that creates liability without regard to fault, that is silent with respect to the eventual allocation of liability among co-defendants, and that contains no express preemption provision impliedly preempts state-law claims for indemnification.

Real Housewife of NJ Accused Of Hiding Income From Bankruptcy Court

http://www.abc26.com/entertainment/wpix-housewife-teresa-hiding-income,0,3772882.story

New Median Income Amounts go into Effect November 1, 2010

http://www.justice.gov/ust/eo/bapcpa/20101101/meanstesting.htm

Analysis: Short Sales Resisted as Foreclosures Are Revived

As Bank of America and GMAC prepare to resume foreclosures again after a brief moratorium due to faulty paperwork, many hard-pressed homeowners are asking why lenders often balk at a less disruptive solution: short sales, the New York Times reported today. The halt in most foreclosures the last few weeks gave a hint of hope to homeowners, who found breathing room to pursue alternatives. Consumer advocates took the view that this might pressure banks to offer mortgage modifications on better terms and perhaps drive interest in short sales, which are rising sharply in many corners of the nation. However, some major lenders took a quick inventory of their foreclosure practices and insisted their processes were sound. Concerns about fraud are one of the reasons lenders are so careful about short sales. Sometimes well-off homeowners want to portray their finances as dire and cut their losses on a property. In other instances, distressed homeowners try to make a short sale to a relative, who would then sell it back to them (a practice that is illegal). A recent industry report estimates that short sale fraud occurs in at least 2 percent of sales and costs banks about $300 million annually.

http://www.nytimes.com/2010/10/25/business/25short.html?_r=1&ref=business
 

B of A Finds Foreclosure Document Errors

Bank of America Corp. for the first time acknowledged finding some mistakes in foreclosure files as it begins to resubmit documents in 102,000 cases, the Wall Sreet Journal reported today. The Charlotte, N.C.-based lender discovered errors in 10 to 25 out of the first several hundred foreclosure cases it examined starting last Monday. The problems included improper paperwork, lack of signatures and missing files, and in certain cases, information about the property and payment history that did not match. Some of the defects seem relatively minor, according to the bank, and bank officials said that they have not uncovered any evidence of wrongful foreclosures. However, the bank uncovered these mistakes while preparing less than 1 percent of the first foreclosure files that it intends to resubmit to the courts in 23 states. As the nation's largest mortgage lender, the bank is under regulatory pressure to show that its mortgage process is not flawed amid revelations that many banks used "robo-signers" to approve large numbers of foreclosure documents without reading them closely.

http://online.wsj.com/article/SB10001424052702303864404575572662815011760.html?mod=WSJ_hp_LEFTWhatsNewsCollection

Florida Launches Pilot Program for Unemployed Homeowners

On Monday, the Florida Housing Finance Corporation will launch a pilot program to help unemployed and underemployed homeowners with their mortgage payments. The pilot will test the waters for the state's planned use of its federal dollars allocated through the Treasury's Hardest Hit Fund. Assistance is only available to Lee County homeowners during the 90-day pilot period, but officials say they plan to go statewide during the first part of 2011.

http://www.floridahousing.org/

https://www.flhardesthithelp.org/

The Unemployment Mortgage Assistance Program (UMAP) will provide up to 18 months of first mortgage payments directly to the lender on behalf of unemployed/underemployed homeowners until they can resume making payments on their own. 

The Mortgage Loan Reinstatement Payment (MLRP) Program will be used to bring a delinquent mortgage current for homeowners who have returned to work or recovered from underemployment.


Both UMAP and MLRP program funds will be in the form of a zero percent, deferred-payment loan. The loan can be forgiven over a five-year period, at a rate of 20 percent each year.